FACC 300 Lecture Notes - Lecture 8: Net Present Value, Gross Domestic Product, Cash Flow
30 Nov 2017
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Document Summary
Inflation decreases the purchasing power of money over time, i. e. the price of a fixed amount of goods or services increases. If their earnings do not keep pace with this increasing price trend, consumers become poorer over time. The price of particular items do not inflate, i. e. increase, at the same rates within a country or among countries the rate of increase depends on location and markets. Thus, the general rate of inflation reflects the average rate of increase in prices over time within the economy of a country. Annual rates of inflation in canada (based on consumer price index) Not all price changes are caused by inflation. Reasons used to explain inflation: demand pull consumers have more money to spend, thus creating an increase in demand. Cost push suppliers want to increase their real level of income. Inflation psychology buy now on credit because loans can be repaid in the future with cheaper money.
